The Census Bureau released a report on the new Supplemental Poverty Measure (SPM) the week of October 31. The report shows that under the SPM there were an estimated 2.5 million more people living in poverty in 2010 than indicated by the official poverty rate. It also shows that, without government intervention, poverty would be much worse.
The official poverty measure was adopted in 1969 and has not changed significantly since. There have been concerns for many years that it is inadequate because it does not capture government benefits that effectively increase a family’s income, the changing standard of living, or the difference in prices across geographies. The SPM addresses these concerns. SPM will not replace the official poverty measure, but will be released every year in conjunction with the official measure to give policymakers a better understanding of economic realities and trends.
Overall, the national SPM poverty rate was higher than the official rate in 2010 at 16.0% compared to 15.1%. However, the SPM poverty rate is lower among some groups, such as renters, children, Blacks and those living outside of metropolitan areas. In fact, according to the SPM estimates, 18.2% of those under the age of 18 were living in poverty, which is well below the official poverty rate of 22.5% for this age group. This decrease appears to be a result of the SPM’s inclusion of the Earned Income Tax Credit (EITC), Supplemental Nutrition Assistance Program (SNAP), housing subsidies and other in-kind benefits aimed at improving the economic situation of the poor. For instance, not accounting for the EITC would result in an SPM poverty rate of 22.4% among children. The SPM shows the positive impact of government subsidies on families, especially on those with children.
On the other hand, SPM estimates show the poverty rate among those aged 65 or older is much higher (15.9%) than indicated by the official poverty measure (9.0%). A major contribution to this increase is that the SPM takes medical out-of-pocket expenses (MOOP) into account, while the official poverty rate does not. If MOOP were not included in the SPM, the poverty rate among the elderly would only be 8.6%.
There are also more people living on the edge of poverty according to the SPM analysis than the traditional approach indicates. The SPM shows that almost half (47.9%) of Americans are living at 200% of the poverty threshold, compared to just 34% using the official measure. These families may be receiving some form of assistance to keep them out of poverty, but the loss of that assistance could push them below the poverty line.
The Census Bureau acknowledges that the SPM is not perfect and that further research needs to be done to improve the measurement, such as looking at the effects of adjusting medical expenses for those without health insurance.
To read the full report from the Census Bureau, The Research Supplemental Poverty Measure: 2010, go to http://www.census.gov/hhes/povmeas/methodology/supplemental/research/Short_ResearchSPM2010.pdf